The Euro has fallen across the board on Thursday in what appears to be a reaction to the announcement of a sizeable quantitative easing programme by European Central Bank (ECB), which is aimed at stabilising the Eurosystem as it deals with the fallout from the coronavirus pandemic.

With European countries in effective lockdown and infection rates still rising markets demanded credible and decisive action from the central bank which had been accused of a wrong-footed approach to the crisis that will almost certainly result in a deep recession. The ECB convened a special meeting on Wednesday night that saw the Governing Council agree to make €750BN available to the Eurozone via the purchase of public and private securities.

The Euro has fallen by over a percent against the Dollar, Pound and Dollar-bloc currencies in the hours following the announcement, as markets judge this to be a sizeable package that will indeed have an impact.

To some readers it would therefore seem ironic that the Euro is actually under-performing its rivals in reaction to the ECB's seemingly competent actions.

But, the textbook states that the Euro tends to benefit when global stock markets are falling in the current environment, therefore stock market stability will work against the currency. Furthermore, the textbook also suggests that currencies fall when their issuing central bank engages in quantitative easing, particularly when the timing and scale of the easing is unexpected. This is certainly the case with the ECB's latest actions.

"We have been very critical of the ECB in the past few weeks, primarily because we consider the message that monetary policy is close to its limits, with the inference that fiscal policy has to step in, as a very dangerous signal to send to markets, especially in this environment. We are happy to eat our words today, at least based on the scope and size of this package, and, just as importantly, the manner in which it is communicated to markets. The ECB has it’s mojo back, and that’s a good thing!" says Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics.

The ECB governing council convened an emergency meeting on Wednesday night and launched the Pandemic Emergency Purchase Programme (PEPP, which is expected to run until the end of the year, and include all assets currently eligible in the existing quantitative easing programme.

Calculations by Pantheon Macroeconomics show the ECB will now be buying a total of just over €115B per month in the next nine months, "which is a significant lift," says Vistesen.

The Pound-to-Euro exchange rate which is now back up to at 1.0799, a 1.82% advance on where it opened the day.

The EUR/GBP is at 0.9260 and we would remind those looking to buy Sterling they are still seeing the best rates in over a decade. Speak to a dealer about how to be able to lock-in these record rates for the future via a forward contract.

Launching the PEPP programme, ECB President Christine Lagarde said that “extraordinary times requires extraordinary action". This marks a decisive shift by Lagarde who had been criticised for taking a rather sanguine approach to Eurozone stresses when she said at the March 12 meeting that the ECB was not here "to close spreads".

This was in reference to whether or not the ECB should or could provide support to ensure the spread between the yields paid by some EU countries was not overly excessive when compared to the spreads paid by other countries.

Specifically, in times of stress countries such as Greece are asked to pay significantly more than Germany is by investors. But, ECB action can minimise the difference by buying up Greek debt assets, thereby easing stresses on the broader Eurozone system.

Lagarde and the ECB now look willing to do what is necessary to maintain stability, and markets like this. "We welcome this shift, as we suspect that markets will as well," says Vistesen.

Above: GBP/EUR is higher today, but has a great wall to climb in order to recover its February-March losses.

The British Pound's bounce against the Euro looks to be over with the gains seen in the first half of this week rolling over and giving way to a familiar trend of weakness which could extend below 1.09 over coming weeks, according to analysis from investment bank Crédit Agricole CIB.

The Pound-to-Euro rate could garner support on Monday or even find itself receiving a bid as the economy partially exits 'lockdown,' but a full sleight of fundamental risks may trouble the British currency as the week progresses.

The Pound-to-Euro rate limped into the weekend as the British currency slipped while Europe's unified unit broke to the upside from a stifling multi-month range although things could get ugly for Sterling if EUR/USD and GBP/USD continue to diverge from each other in the days and weeks ahead.

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